Iran is forging ahead with its nuclear programme, the United Nations’ nuclear watchdog reported on Wednesday, deepening the dilemma facing US president-elect Barack Obama over his campaign promise to engage with Tehran.

The latest report by the International Atomic Energy Agency reveals that Iran is rapidly increasing its stockpile of enriched uranium, which could be rendered into weapons-grade material should Tehran decide to develop a nuclear device.

EDITOR’S CHOICEIn depth: Iran - Nov-19In depth: The Obama transition - Nov-19Timeline: Iran’s nuclear development - Nov-19The agency says that, as of this month, Tehran had amassed 630kg of low enriched uranium hexafluoride, up from 480kg in late August. Analysts say Iran is enriching uranium at such a pace that, by early next year, it could reach break-out capacity – one step away from producing enough fissile material for a crude nuclear bomb.

“They are moving forward, they are not making diplomatic overtures, they are accumulating low enriched uranium,” said Cliff Kupchan, an analyst at the Eurasia Group, a risk consultancy in Washington. “These guys are committed to their nuclear programme: if we didn’t know that, they just told us again.”

The IAEA report also says there has been a breakdown of communication between the agency and Iran over alleged research on an atomic weapon. “The Iranians are making good progress on enrichment but there is absolute stone-walling on past military activities,” said Mark Fitzpatrick of the International institute for Strategic Studies. “It’s very disappointing.”

The progress chalked up by Iran increases the difficulties for Mr Obama, who campaigned on promises of talking to America’s enemies, although during the election he scaled down his initial vow to meet Iran’s leaders to a more general commitment to consider doing so if it advanced US interests.

“Obama faces a real dilemma,” said the Eurasia Group’s Mr Kupchan. “He must decide whether to pursue diplomacy quickly in light of rapid Iranian progress or whether to wait in the hope of a more moderate Iranian leadership after Iran’s June presidential election.”

European diplomats have responded favourably to Mr Obama’s suggestion of US engagement with Iran, although they are keen to avoid unilateral US actions that would rip up the approach fashioned by the permanent five members of the UN Security Council and Germany.

IAEA officials said relations between the organisation and Iran had deteriorated so much there had been no contact between them for over two months, UN officials said on Wednesday.

”We had gridlock before but then at least we were talking to each other. Now it’s worse. There is no communication whatsoever, no progress regarding possible military dimensions in their programme,” a senior UN official said.

Ahead of Wednesday’s report, Mahmoud Ahmadi-Nejad, the Iranian president, signalled that his country would press ahead with its nuclear program.

In a speech broadcast on TV, he said the US and its major allies wanted to deprive Iran of “honor and independence” by pressuring the country into halting its uranium enrichment work.